Immigration and Demographics

You hear a great deal about immigration these days. Most of the discussion is heated and there appears to be great polarization on the issue. If you look at American history, there has never been a rational process for immigration in perhaps the last 150 years. I will not get on a soapbox and discuss the current political debate other than to say that, as both a father and a grandfather, separating families, especially little children from their relatives, disturbs me more than anything in my lifetime. The media focus on the current controversy but mostly ignore the big issue to come.

Okay, let’s get in to my wheelhouse—demographics. We need immigrants in the United States now and, in the future, the need will become even more acute. It does not have to do with politics. The issue has to do with two wonky terms—The Age/Dependency Ratio and Zero Population Growth (ZPG). In 1980, there were 19 people 65+ for every 100 aged 18-64 in the U.S. Now, there are 25 persons 65+ for every 100 who are 18-64. By 2030, census projections are that there will be 35 persons 65+ for every 100 of traditional working age 18-64. Already, this is putting a strain on Social Security and Medicare as those systems are basically “pay as you go” meaning that taxpayers pay in but the outflow goes largely to the rapidly growing 65+ demographic.

Coupled with the Age/Dependency ratio is Zero Population Growth also known as ZPG. In order for a population to remain stable, the fertility rate need to be 2.1 children per couple. During my youth as an early baby boomer, it was 3.7 children on average. In late 2017, it fell to 1.76 meaning that America will face a decline in population along with workers paying in to Social Security, Medicare and the IRS in the years to come. Bring this up even with erudite people and they agree but say that we are in much better shape than Italy and Spain which now have a fertility rate well below ZPG at around 1.0. That is true and will let us observe what will happen to Western countries along with Japan that are below ZPG. Yet, our problem gets worse even though intelligent people see it coming and do nothing.

In 15 years or so, America will be faced with some tough choices:

1) Cut benefits in Social Security or Medicare (or means test Social Security and tax much of it away from the affluent, raise the age for eligibility, or raise Social Security taxes). These would all work in some combination but are they politically viable?

2) Raise taxes sharply across the board and not just on the top 1-5%.

3) Allow more immigration.

Throughout our history, immigrants have been a driver of growth in America. Today, they tend to be eager, hard workers and many are entrepreneurial. They are coming from places that were struggling or dangerous and buy into the American Dream big time. We need them now more than ever as demographics are an unstoppable trend or, as I have often said, “Demographics are destiny.”

For me, America has always been an idea even more than a place. You have the freedom to fail or to make something of yourself. My tough minded Irish catholic mother once said to me—“Foreigners often are taught to know their place—in America, you make your place.” I was 22 when she said that and it has stuck with me. Perhaps that is why people who are American immigrants tend to be so aspirational.

Years ago, I finished a client meeting and some clients and I were at an airport. The senior client bought us all a drink. He asked us all our ancestry. When my turn came, I said that I was largely Irish and a bit English. He then asked when did our families come to America. I was a bit uncomfortable but told the truth. James Cole came to Plymouth, MA in 1631 ( a few ships after the Mayflower). One of the clients, not the boss, said: “Wow, you are more of an American than the rest of us.” I replied carefully that no, we are all Americans and someone who took the oath of allegiance that morning was every bit as much of an American as I. They called their flight and the clients scattered. As I picked up my roller board and headed for my gate, a man stopped me. “I heard what you said (I was at the next table), and wanted to shake your hand. I became a citizen two years ago and am very proud but people sometimes tell me that I am not really an American.” I said, “they do not know what an American really is, I suppose.”

We need immigrants. Demographics do not lie. They can save us from a lot of pain.

If you would like to contact Don Cole directly, you may reach him at doncolemedia.com or leave a message on the blog.